The Collateral Damage to Business From a Social Media Crisis

Most discussions and case studies around social media crises faced by companies is focused on consumer reaction – and direct loss of sales or brand impact. While these are critical, a non-consumer focused company may think they are more immune to these issues and a consumer product company may think the damage is relagated to the consumer segment, not their business to business side. This can be a dangerous assumption. We look at some of the collateral, perhaps harder to measure, damage that can occur.

Mistake Number One: Many companies who only sell business-to-business (B2B) assume that social media is all about consumers and that they are immune to damage. This is a fatal error. Many industries have niche social networks, forums, blogs, Twitter accounts, where industry news is discussed. Failure to understand this can cause significant problems.

Risk From Government Contracts
If a business also sells to governments, contracts may be lost. Depending on the severity of the issue, such as legal actions being talked about or happening, government agencies may be reluctant to buy products or services from a business they feel may be distracted from a contract or unable to fulfil it. It is hard to know if this happens. Some indicators may help determine the risk however.

Competitor Leverage
The bigger the story via social media (whether general sites or industry-focused channels) the more a competitor can cause harm. Employees can quickly and easily share information, this means relying on stories only being in major news media is dangerous. Competitors can shape perceptions with existing clients of yours and use it to foster perceptions of inability to complete work and more.

Every Industry Has Social Media Channels
We’ve conducted research and analysis on many industries. There is always some engagement by people in the industry in specialized niche networks, Facebook groups, LinkedIn discussions, FastPitch, eCademy, forums and newsgroups. Whether or not a CEO or senior executive is aware or participating in them doesn’t matter – employees are. Including from competitors. And they share information. A lot.

Board Perceptions & Risks
If it is a public company or just has a board and a smaller set of investors, once word trickles out, problems of governance come into play. A board or set of shareholders, may feel management has lost control of the company or are nervous of the management teams ability to contain and deal with the issue. If it is a major shareholder or board officer who raises awareness of an issue to management, they may feel management is not suitably aware of industry issues. There is then the possibility of a fractious board, a senior management battle and so on…

Investment Challenges
Companies looking to raise capital from equity sources or even debt, may find themselves in a challenging place if a negative story has reached the ears of those in the financial sector whom they are courting. If financiers perceive problem or potential escalation, they may either require more security or stall on a deal.

Supplier Fears
Suppliers of services or materials to a company who are tuned into the industry networks (often, they are more connected into online channels than the buyer of their product) may be concerned with the company’s ability to surface from a crisis. If they have extended credit, they may retract that credit or require new terms or demand outstanding payment to mitigate increased fears of risk.

Perception Can Rule The Day
The reality of these challenges are ones that businesses are just beginning to grasp.  Since these issues are  beyond just reputation management and are not as quantifiable being more qualitative in nature. It is not as easy as seeing immediate sales losses or a series of negative “tweets” on Twitter. Often, senior management is unaware of the social media tools being used in their industry. Monitoring tools rarely, if ever, pick these up because they are focused a) on mainstream social media channels for consumers, b) more business-to-consumer than B2B and c) perform poorly with smaller data sets to display.

We live in a world where perception can quickly become the reality. And that can spread across far more than just the consumer market and into supplier networks, financial sector and shareholders.

A Whole New Set of Headaches
All of this to say, the CEO and executive management of a company today have a whole new set of risks to manage. In some cases, they may not even realise an issue escalated as the result of a forum discussion or blog posting. Some research into these deep Web sources (where social media monitoring or reputation management tools simply do not go) can help a) understand the issue and b) help address the issue and give management the opportunity to mitigate risks and deflect the damage quickly.